Working Capital Case - Great Ideas Manufacturing Company is...

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Great Ideas Manufacturing Company is located in Atkins, AR. They currently manufacture pens to haul chickens from local farms to processing plants nearby. The Company has historically had consistent sales, as well as a positive gross profit margin. However, the Company has not been as profitable as the owners of the Company have wanted. The CEO of the Company believes the current capital structure of the business is optimal, and the Company does not need to purchase any additional equipment or real estate. He believes that the Company can increase it profitability by focusing on its short-term assets and liabilities. He has hired your team to analyze the Company’s short term assets and liabilities to determine how they can be changed to improve the profitability of the Company. Inventory Purchases and Payables The Company currently purchases 100% of its inventory from Fred’s Suppliers, Inc. Fred currently charges $700 per ½ ton of material. The Company normally purchases the inventory on credit in increments of 5 tons, and pays it off in 90 days, since the terms are n/90.
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